Leading home improvement retailers Lowe’s (NYSE:LOW +1.1%) and Home Depot (NYSE:HD +0.8%) are bouncing on Monday after a steep sell-off to close last week.
Both stocks have been hit hard thus far in 2022, falling over 20% since the start of the year as rising rates and a turn away from pandemic purchasing trends act against bullish theses.
While eroding eCommerce trends are the most obvious indicator of a turn in pandemic trends, US retail shopping is falling broadly. Per mobile-phone location data collected by SafeGraph, foot traffic fell 10.9% in the first week of May. Leading these declines were home-improvement stores, which marked a nearly 25% drop.
For the Fed policy front, rate hiking cycles have historically hampered home improvement stocks. Indeed, just last week Gordon Haskett analyst Chuck Grom warned that the uncertainty permeating the space is reminiscent of pre-financial crisis trends.
Still, confidence in the housing sector appears to be holding up better than overall retail sentiment. The small rebound on Monday could, therefore, simply be a mild relief-rally in light of recent selloffs as well as a flight to some of the sturdier stocks against economic uncertainty.
There may also be some optimism driven by a better weather forecast that could add to gardening demand that has been constrained by an unseasonably cold spring. A peculiar weather pattern that included a polar vortex in New England and cold snap across the mid-west in April certainly suggests that demand was cut into.
Shares of each stock rose just over 0.5% in mid-day trading on Monday, both building back significantly, in tandem, from a decline on the open.
Earnings are expected for each in the next week, with Home Depot (HD) set to report on May 17 and Lowe’s (LOW) preparing its print for the following day.